Should you buy Bank of America Corporation (NYSE:BAC) and sell Goldman Sachs Group, Inc. (NYSE:GS)

People are highly hesitant in purchasing the stocks of financial entities, especially banks after the economic downturn. The collapse of several banks in the United States over the last 3-4 years have also discouraged investors to be cautious about buying stocks of banks. Still, the balance sheets of many banks have shown substantial improvement and bank stocks have also gained proportionately. Still, analysts feel that the shares of many banks are trading at substantial discounts compared to their previous historical values and their intrinsic values. Analysts strongly believe that Bank of America Corporation (NYSE:BAC) stock is one such stock that is worth more than its present value. They make this prediction in spite of the fact the stock of Bank of America nearly doubled last year. The bank has been steadily expanding its global operations and is likely to announce substantial dividends in the near future, which should be reason enough to buy the stock of Bank of America now. The stock is likely to climb significantly from its present price of $12.17 a share.

The Goldman Sachs Group, Inc. (NYSE:GS) was one investment bank that was able to survive the devastating financial crisis of 2008. In fact, it was forced to downplay the success it achieved during that period and in the following years. Further, there have been many conspiracy theories that the company has been conducting its operations in manipulative ways and swallowing public money secretly. Whether these theories are true or not, analysts feel that it is time that you start selling the stock of Goldman Sachs due to the following three reasons.

The damage that Goldman Sachs suffered after the financial crisis and the banking industry collapse

  • Its present attitude of avoiding risk at present in improving financial environment in spite of its traditional pattern of taking huge risks for high profits
  • Large payouts to its top executives which might need large future profits continuously for which there is no guarantee

Goldman Sachs closed at $149.12 a share on April 12, 2013, up $0.05 or 0.03%.

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Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.

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